Gazprom raises gas export price as Ukraine looks for cash

Russia’s natural-gas export monopoly raised prices for Ukraine 44 percent after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.

OAO Gazprom (GAZP) said the increase complies with its supply contract and is necessary because Ukraine owes more than $1.7 billion for gas bought since the start of 2013. The government of ousted President Viktor Yanukovych negotiated a discounted price last year as he grappled with protests after ditching an association agreement with the European Union.

“The gas discount can no longer be used,” Gazprom Chief Executive Officer Alexey Miller said Tuesday by e-mail. Ukraine has failed to settle its debt for gas supplies from 2013 and isn’t paying for current supplies in full, he said.

The move raises the prospect that state-run Gazprom may threaten to cut supplies to Ukraine, which buys about half its gas from Russia, something that’s happened at least twice since 2006 because of payment disputes. Gazprom’s decision came as Russia moved to reduce military tensions after its annexation of Crimea, withdrawing some troops from Ukraine’s border.

Ukraine, completing a deal with the International Monetary Fund and waiting for U.S. aid, is critical to EU energy security because about 15 percent of European gas supplies travel through its Soviet-era pipeline network. In January 2009, a dispute between Russia and Ukraine disrupted deliveries to Europe for about two weeks during freezing weather.

European customers

The second-quarter gas price for Ukraine is rising to $385.50 per 1,000 cubic meters from $268.50 in the first quarter, Miller said. The average price for European customers is seen at about $370 to $380 this year, according to the company’s forecasts.

At the same time as raising prices, Gazprom also met a contractual obligation to increase the fee it pays Ukraine’s pipeline operator UkrTransGaz for shipping fuel to Europe by 10 percent, Miller said.

Gas transit to Europe through Ukrainian pipelines is proceeding as normal, spokesmen at Gazprom and UkrTransGaz said by phone.

Ukraine and the EU should intensify their work on natural gas shipments to the country to prevent conflict with Russia, Ukraine’s Energy Minister Yuri Prodan told European Energy Commissioner Guenther Oettinger in a letter released on the ministry’s website on March 27.

“Any serious shock is unlikely for now,” Dennis Sakva, an energy analyst at Dragon Capital in Kiev, said Tuesday by e-mail. “Gazprom essentially is returning prices that Ukraine had in 2013.”

Underground storage

Ukraine may use fuel from its underground storage facilities before it gets the IMF aid, which is expected this month, Sakva said.

Kobolyev said he planned to meet Miller this week, declining to elaborate on what they’ll discuss.

As part of the preliminary IMF package agreed on last week, Ukraine pledged to raise retail energy prices for households to bring them closer to market rates.

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Soldiers under Russian command stand-by at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians troops, stationed at their garrison nearby, confronted the Russian soldiers unarmed today. The Russian-led troops fired their weapons into the air but then granted Colonel Yuli Mamchor, commander of the Ukrainian military, negotiations with their commander. (Photo by Sean Gallup/Getty Images) less

Soldiers under Russian command stand-by at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. ... more

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Soldiers under Russian command stand-by at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians troops, stationed at their garrison nearby, confronted the Russian soldiers unarmed today. The Russian-led troops fired their weapons into the air but then granted Colonel Yuli Mamchor, commander of the Ukrainian military, negotiations with their commander. (Photo by Sean Gallup/Getty Images) less

Soldiers under Russian command stand-by at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. ... more

Photo: Getty Images

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Soldiers under Russian command look on from a military vehicle at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians troops, stationed at their garrison nearby, confronted the Russian soldiers unarmed today. The Russian-led troops fired their weapons into the air but then granted Colonel Yuli Mamchor, commander of the Ukrainian military, negotiations with their commander. (Photo by Sean Gallup/Getty Images) less

Soldiers under Russian command look on from a military vehicle at the Russian occupied Belbek airbase as Russian-led troops blockaded a number of Ukrainian military bases across Crimea, on March 4, 2014 in ... more

Photo: Getty Images

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A line of pro-Russian militants guard the Russian occupied Belbek airbase as Russian-led troops blockade a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians troops, stationed at their garrison nearby, confronted the Russian soldiers unarmed today. The Russian-led troops fired their weapons into the air but then granted Colonel Yuli Mamchor, commander of the Ukrainian military, negotiations with their commander. (Photo by Sean Gallup/Getty Images) less

A line of pro-Russian militants guard the Russian occupied Belbek airbase as Russian-led troops blockade a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians ... more

Photo: Getty Images

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A soldier under Russian command guards the Russian occupied Belbek airbase as Russian-led troops blockade a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians troops, stationed at their garrison nearby, confronted the Russian soldiers unarmed today. The Russian-led troops fired their weapons into the air but then granted Colonel Yuli Mamchor, commander of the Ukrainian military, negotiations with their commander. (Photo by Sean Gallup/Getty Images) less

A soldier under Russian command guards the Russian occupied Belbek airbase as Russian-led troops blockade a number of Ukrainian military bases across Crimea, on March 4, 2014 in Lubimovka, Ukraine. Ukrainians ... more

Photo: Getty Images

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Secretary of State John Kerry places roses atop the Shrine of the Fallen in Kiev, Ukraine March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly Sotnya" (Hundred). Over the course of the EuroMaidan protests, almost 100 protesters were killed by police. (AP PHoto/Kevin Lamarque, Pool) less

Secretary of State John Kerry places roses atop the Shrine of the Fallen in Kiev, Ukraine March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly ... more

Photo: Associated Press

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People wearing cossack's hats take part in a rally in the southern city of Rostov-on-Don, on March 4, 2014, in support of ethnic Russians in the Crimea and Eastern Ukraine. The paster reads: "We support the brother people!" President Vladimir Putin, who recently won approval from Russia's upper house of parliament to send troops into Ukraine due to the stand-off in Crimea, said today there was currently no need for military action -- but Moscow reserved the right to do so. AFP PHOTO / ANDREY KRONBERGANDREY KRONBERG/AFP/Getty Images less

People wearing cossack's hats take part in a rally in the southern city of Rostov-on-Don, on March 4, 2014, in support of ethnic Russians in the Crimea and Eastern Ukraine. The paster reads: "We support the ... more

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A young woman takes part in a rally in the southern city of Rostov-on-Don, on March 4, 2014, in support of ethnic Russians in the Crimea and Eastern Ukraine. The posters read: "No to Nazism!" (L), a Russian crossed-out acronym for NATO (R). President Vladimir Putin, who recently won approval from Russia's upper house of parliament to send troops into Ukraine due to the stand-off in Crimea, said today there was currently no need for military action -- but Moscow reserved the right to do so. AFP PHOTO / ANDREY KRONBERGANDREY KRONBERG/AFP/Getty Images less

A young woman takes part in a rally in the southern city of Rostov-on-Don, on March 4, 2014, in support of ethnic Russians in the Crimea and Eastern Ukraine. The posters read: "No to Nazism!" (L), a Russian ... more

Photo: AFP/Getty Images

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Russian President Vladimir Putin (R) gives a news conference at his country residence of Novo-Ogaryova, outside Moscow, on March 4, 2014. Russian President Vladimir Putin on Tuesday said that deposed Ukrainian president Viktor Yanukovych had no political future but asserted he was legally still head of state. AFP PHOTO / RIA NOVOSTI / PRESIDENTIAL PRESS SERVICE / ALEXEY NIKOLSKYALEXEY NIKOLSKY/AFP/Getty Images less

Russian President Vladimir Putin (R) gives a news conference at his country residence of Novo-Ogaryova, outside Moscow, on March 4, 2014. Russian President Vladimir Putin on Tuesday said that deposed Ukrainian ... more

Photo: AFP/Getty Images

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Pro Russian supporters stand in line ouside the headquarters of the Ukrainian Navy in Sevastopol on March 4, 2014. The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on Monday of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflic AFP PHOTO/ Filippo MONTEFORTEFILIPPO MONTEFORTE/AFP/Getty Images less

Pro Russian supporters stand in line ouside the headquarters of the Ukrainian Navy in Sevastopol on March 4, 2014. The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian ... more

Photo: AFP/Getty Images

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US Secretary of State John Kerry (second on the right) stands beside a barricade at the Shrine of the Fallen in Kiev on March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen "Heroes" of the "Heavenly Sotnya" (Hundred). Over the course of the EuroMaidan protests, almost 100 protesters were killed by police. Most of them died on February 20 killed by sniper or automatic weapons fire on Institutska Street. US Secretary of State John Kerry arrived in Kiev Tuesday for talks with Ukraine's new interim government, amid an escalating crisis in Crimea. His visit came as the United States said it would provide $1 billion to financially-stricken Ukraine as part of an international loan. With the Black Sea peninsula of Crimea under near complete control by pro-Russian forces, US officials said Moscow could face sanctions within days. AFP PHOTO / POOL - Kevin LamarqueKEVIN LAMARQUE/AFP/Getty Images less

US Secretary of State John Kerry (second on the right) stands beside a barricade at the Shrine of the Fallen in Kiev on March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen ... more

Photo: AFP/Getty Images

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Members of the Russian forces stand guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on March 3 of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflict. AFP PHOTO/ GENYA SAVILOVGENYA SAVILOV/AFP/Getty Images less

Members of the Russian forces stand guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the ... more

Photo: AFP/Getty Images

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Members of the Russian forces stand guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on March 3 of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflict. AFP PHOTO AFP PHOTO/ GENYA SAVILOVGENYA SAVILOV/AFP/Getty Images less

Members of the Russian forces stand guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the ... more

Photo: AFP/Getty Images

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Members of the Russian forces stand guard at the gateway of a Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on March 3 of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflict. AFP PHOTO/ GENYA SAVILOVGENYA SAVILOV/AFP/Getty Images less

Members of the Russian forces stand guard at the gateway of a Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the ... more

Photo: AFP/Getty Images

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A woman walks past members of the Russian forces standing guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on March 3 of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflict. AFP PHOTO/ GENYA SAVILOVGENYA SAVILOV/AFP/Getty Images less

A woman walks past members of the Russian forces standing guard at the gateway of Ukrainian unit in the small Crimean city of Kerch 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ... more

Photo: AFP/Getty Images

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A woman speaks to Ukrainian marines guarding the unit as members of Russian forces stand guard outside in the small Crimean city of Kerch on March 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko has issued an ultimatum to the Ukrainian military personnel in Crimea, the Interfax-Ukraine news agency reported. Ukraine accused Russia on March 3 of pouring more troops into Crimea as world leaders grappled with Europe's worst standoff since the Cold War and the Moscow market plunged on fears of an all-out conflict. AFP PHOTO/ GENYA SAVILOVGENYA SAVILOV/AFP/Getty Images less

A woman speaks to Ukrainian marines guarding the unit as members of Russian forces stand guard outside in the small Crimean city of Kerch on March 4, 2014.The Russian Black Sea Fleet commander Aleksandr Vitko ... more

Photo: AFP/Getty Images

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Russian soldiers fire warning shots at the Belbek air base, outside Sevastopol, Ukraine, on Tuesday, March 4, 2014. Russian troops, who had taken control over Belbek airbase, fired warning shots in the air as around 300 Ukrainian officers marched towards them to demand their jobs back. (AP Photo/Ivan Sekretarev) less

Russian soldiers fire warning shots at the Belbek air base, outside Sevastopol, Ukraine, on Tuesday, March 4, 2014. Russian troops, who had taken control over Belbek airbase, fired warning shots in the air as ... more

Photo: Associated Press

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U.S. Secretary of State John Kerry, right, inspects protesters barricades in Kiev, Ukraine, Tuesday, March, 4, 2014. In a somber show of U.S. support for Ukraines new leadership, Secretary of State John Kerry walked the streets Tuesday where nearly 100 anti-government protesters were gunned down by police last month, and promised beseeching crowds that American aid is on the way. The Obama administration announced a $1 billion energy subsidy package in Washington as Kerry was arriving in Kiev.(AP Photo/Efrem Lukatsky) less

U.S. Secretary of State John Kerry, right, inspects protesters barricades in Kiev, Ukraine, Tuesday, March, 4, 2014. In a somber show of U.S. support for Ukraines new leadership, Secretary of State John ... more

Photo: Associated Press

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Secretary of State John Kerry talks with a religious leader as views the Shrine of the Fallen in Kiev, Ukraine, Tuesday, March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly Sotnya" (Hundred). Over the course of the EuroMaidan protests, almost 100 protesters were killed by police. (AP Photo/Kevin Lamarque, Pool) less

Secretary of State John Kerry talks with a religious leader as views the Shrine of the Fallen in Kiev, Ukraine, Tuesday, March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the ... more

Photo: Associated Press

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A gas mask lies among other debris at a barricade where Secretary of State John Kerry was visiting, Tuesday, March 4, 2014, at the Shrine of the Fallen in Kiev, Ukraine. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly Sotnya" (Hundred). Over the course of the EuroMaidan protests, almost 100 protesters were killed by police. (AP Photo/Kevin Lamarque, Pool) less

A gas mask lies among other debris at a barricade where Secretary of State John Kerry was visiting, Tuesday, March 4, 2014, at the Shrine of the Fallen in Kiev, Ukraine. The Shrine of the Fallen, located on ... more

Photo: Associated Press

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Secretary of State John Kerry visits the Shrine of the Fallen in Kiev, Ukraine, Tuesday, March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly Sotnya" (Hundred). Over the course of the EuroMaidan protests, almost 100 protesters were killed by police. AP Photo/Kevin Lamarque, Pool) less

Secretary of State John Kerry visits the Shrine of the Fallen in Kiev, Ukraine, Tuesday, March 4, 2014. The Shrine of the Fallen, located on Institutska Street, honors the fallen Heroes of the "Heavenly ... more